petitefrancaise

Can someone please give me an idiots guide to how one manages working for a UK company in the USA as a freelancer?

NI? Tax? etc
TIA

Pulaski

You are a contractor for the UK company and you invoice them for your time and/or services. No taxes or NI are withheld in the UK and you register as self-employed in the US and pay US income and payroll taxes. .... You might need to pay for business registration fee, depending on the nature of your business, and if Texas levies one.

It is probably tidiest if you register an LLC in the US as a vehicle for your business, and get a bank account for it, to keep the income and expenses separate. Registering an LLC is easy-peasy for an individual or married couple (busines partners would need an operating agreement, to determine how the business is managed) - probably about $100 initial registration with the Texas Secretary of State's web site, which is easy to do without the involvement of a lawyer, then maybe $200/yr +/- annual reregistration.

tom169

You may want to consider invoicing your client in USD so that any fluctuations in the exchange rate are absorbed by them, and not you.

Although this may make it another barrier to trying to compete with British business.

Also, you'll be liable for the taxes and contributions that a business makes and what typically aren't obvious to an employee.

After revenue surpasses a certain amount (the figure escapes me) you'll need to start making estimated payments on this to avoid fines.

petitefrancaise

Interesting, thanks.

For now, the amounts involved won't be very much so I was wondering about getting paid into my UK bank account to build up some savings there and then declaring it in the USA. Do I get to decide the exchange rate when I declare it or does the IRS ( I'm sure they will!!)

tom169

I've recently been working through this with preparing annual tax return.

The guidance is "The Internal Revenue Service has no official exchange rate. Generally, it accepts any posted exchange rate that is used consistently."

Source: https://www.irs.gov/individuals/inte...exchange-rates

Nutmegger

I send them a bill, requesting payment directly into my US bank account in dollars. I then declare it as US income. I've been working for various organizations around Europe for years, and always handle it this way. Never had any need for any kind of LLC.

nun

Agreed a simple "sole proprietorship" sounds like the right way to do this. Then taxes are easy as it all goes on your personal 1040.

petitefrancaise

sole proprietorship -
do I get to deduct expenses?

Nutmegger, if you don't mind me asking, what items do you deduct?

Noorah101

Yes.

My husband was sole proprietor of his oriental rug repair business, and he deducted the following: travel expenses (including bus fare and taxi as he didn't drive, but you can deduct business mileage if you have a car), business supplies (in his case stuff like raw wool, color dye, repair tools, etc), CPA fee for preparing tax returns (since the business was part of it), depreciation on business equipment, fees for credit cards or banking under the business name, basically ANY business-related expense.

I actually have an excel spreadsheet created for tracking business expenses, I'd be happy to share it with you if you PM me your email address. You too, Nutmegger, if you like!

Rene

Pulaski

Yes, potentially. Mail costs, and phone calls are obvious examples of deductible expenses.

Anything that has a shared or partial use can be murky though. If you buy a computer and printer to use for the work then they'll be expensible (depreciated), if you use an existing computer you should be prepared to justify the proportion of the cost you expense. Ditto a high-speed cable internet connection.

You can expense part of the cost of your home if you set up a dedicated office for business use, but (i ) you will need to tell your home insurer, and (ii) you will need to tell your local council for zoning and property tax purposes, ..... so you may decide not to claim for office space.

Nutmegger

I have a fully dedicated office in my home, full of the usual computers, filing cabinets, printers. The purchase of all the items was originally a deduction; a proportion of the household expenses for the office square footage (electricity, oil, taxes); internet; TV if relevant; I have a dedicated phone line; reference books and newspaper and magazine subs.; office supplies (pens, calendar, toner cartridges, paper, etc.); business gifts to clients; charitable deductions; postage and shipping; medical bills; mileage for client visits and for volunteer work. Probably something I'm forgetting, but there are the basics!

Bob

Quarterly payments, but the fine isn't all that much that it might not be worth the hassle and just do it annually with the regular taxes.

Pulaski

If you have other employment you can just tack a little extra withholding onto your regular pay/salary to cover the tax on the side/contract work.

nun

This is my first year as a sole proprietor and I was unsure of how much I'd earn so my estimated tax payments were a bit high. However, you can adjust your tax bill by making solo 401k contributions.

GeoffM

I thought that too. Unfortunately it seems California have significantly stiffer penalties than the IRS. So it's worth checking for the OP's location.

As for business expenses, only thing I can think of that I don't think has been mentioned is business travel (not commuting). So if you go to a conference, for example, you can deduct travel expenses and half the restaurant costs (bit more complicated than that - research!).

TurboTax is good - not just the software but the forum/articles as well. "Can I deduct X as a business expense" gets typed into Google a lot this time of year!